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My Lex Predict colleagues Daniel Katz and Mike Bommarito, along with Tyler Soellinger and James Chen, have published a fascinating study of how securities markets react to the Supreme Court. The authors find:

Across all cases decided by the Supreme Court of the United States between the 1999-2013 terms, we identify 79 cases where the share price of one or more publicly traded company moved in direct response to a Supreme Court decision. In the aggregate, over fifteen years, Supreme Court decisions were responsible for more than 140 billion dollars in absolute changes in wealth.

For example, here is the graph showing the abnormal returns in the stock for Myriad Genetics, before and after the Supreme Court’s complicated decision at 10:00.

You can see the spike right after 10:00 when the decision was released.The authors explain:

As displayed in Figure 1, the Court’s compromise decision initially confused the equity market. Fueled in part by media reports, would-be arbitrageurs interpreted the Court’s decision as positive to Myriad in the initial hours of trading. However, this view was ultimately displaced as more careful reading and subsequent understanding revealed that the decision was highly unfavorable to Myriad’s business interests. As a result, the stock began to trade down in the second half of the session. Media coverage following the initial trading day called it a “wild ride” and a “market whipsaw.”

As the dust settled, the Court’s decision was indeed detrimental to Myriad’s long-term financial value. Even after controlling for overall market trends, Myriad’s stock lost in excess of 20% of value over the two-day trading window. Attendant to this change in price, there was also a significant increase in volume as traders sought to shift their positions in light the Court’s decision. Specifically, on the date of decision, there was roughly a thirteen-fold increase in trading volume of the stock. The day thereafter witnessed an eighteen-fold increase in trading volume.

The article also highlights a number of SCOTUS decisions that yielded statistically significant movements on the market. For examples, these graphs illustrate what happened after 10:00 in four cases:

• Limelight Networks v. Akamai (2014): The Court held the answer was no and that decision was highly beneficial to Limelight Networks (LLNW). As displayed in Figure 5, the stock experienced an almost immediate gain of 5%, finishing the day up nearly 15%. The second day of trading saw LLNW continue to steadily rise into the afternoon of the session.
• Coeur Alaska v. SE Alaska Conservation Council (2009): “As displayed in Figure 5, within hours, the Coeur stock (CDE) traded up 10% and finished the day by posting S&P adjusted cumu- lative abnormal returns around 15%. The following day saw some small additional gains, but most of the returns had been established in the first trading day. “
• Altria Group v. Good (2008): “As displayed in Figure 5, following this Court announcement, Altria’s (MO) stock immediately trended down, followed by lateral trading for much of the balance of the date of decision. In the following day, Altria’s continued to decline relative to the S&P as the financial implications of the Court’s decision began to become more widely understood. Ultimately, at the close of the two-day window, the stock had experienced a negative cumulative abnormal return of nearly 9%. “
• Whitman v. American Trucking (2001):  “While the Court’s decision was somewhat mixed, Figure 5 reveals what appears to be a clear negative market reaction to the Court’s decision. The then largest automaker General Motors (GM) traded down over the next two sessions.13 ”
  

The portion of the paper that hits closest to home studies the impact of NFIB v. Sebelius on the leading healthcare companies:

Fascinatingly, the insurance companies surged during the initial reporting that the Court invalidated the mandate. (This counters the conventional wisdom that the insurance companies are happy with Obamacare…). But when everything settled, and everyone realized what happened, the insurance stocks tumbled. The only stocks that continued to grow was Hospital Corporation of America and Magellan Health Services. Aetna, Cigna, Humana, and Anthem all fell.

In Figure 6, we plot cumulative abnormal returns for a significant number of healthcare related stocks including Aetna (AET), Cigna (CI), Hospital Corporation of America (HCA), Health Net (HNT), Humana (HUM), Magellan Health (MGLN) and Anthem / Well Point (WLP). Over the two-day trading window, the Court’s decision drove down the price of a variety of health insurance companies while simultaneously increasing the value of one large hospital conglomerate (HCA) and a healthcare management business (MGLN). Interestingly, each of the stocks of the health insurance companies that ultimately trended downward experienced a significant short term uptick in the immediately aftermath of the Court’s decision. This is likely due to the widespread initial misreporting of the Court’s decision, which appeared to engender market confusion in the immediate aftermath of the Court’s ruling.14 However, unlike the Myriad case discussed earlier, the market quickly corrected itself in response to the subsequent accurate reporting of the Court’s decision. Collectively, among the stocks we evaluated in this study, the Obamacare decision was responsible for absolute changes in shareholder wealth in excess of 6.3 billion dollars.

Very cool.

In 2011, I noted that Ted Franks (who is now my attorney) made an investment decision based on his predicted outcome in Wal-Mart v. Dukes. He was so confident that the Supreme Court would reverse the 9th Circuit that he made a leveraged bet–of 10% of his net assets–that WMT (Wal-Mart’s symbol) will bounce. At the time, 76% of FantasySCOTUS members predicted a reversal. The great, and late Larry Ribstein suggested markets need greater sources of information to make these sorts of investments.

Unfortunately, Ted’s bet didn’t pan out. WSJ Law Blog reported:

No, unfortunately for the lawyer he was in court all morning, challenging the $3.4 billion settlement reached in 2009 in the high-profile Indian trust litigation, which claims the federal government mismanaged the revenue in American Indian trust funds. (Here’s an LB post on the settlement in that case.)

Frank told the Law Blog that by the time he got out of the Cobell settlement hearing, for a noon lunch break, he had missed the bump from the Dukes ruling.

“There were 90 people in the courtroom,” he said. “I couldn’t say, ‘can we stop the proceedings, because I need to engage in a stock sale.’”

Now, it seems Ted is not alone. Others are taking advantage of their SCOTUS predicting prowess.

Today we will provide an introduction to buying and selling homes, and go over the contract of sale.

All of Texas’s standardized sales contract forms are available here. You may wish to take a look at the Texas Real Estate Commission Residential Sales Contract, which we will go over in class.

The lecture note are here.

The site of the first case, Licari v. Blackwelder, is in Westport, CT.

[googlemaps https://maps.google.com/maps?hl=en&q=westport,+ct&ie=UTF8&hq=&hnear=Westport,+Fairfield,+Connecticut&gl=us&ll=41.141472,-73.357905&spn=0.078224,0.152607&t=h&z=13&output=embed&w=425&h=350]

The Texas Statute of Frauds provides:

Sec. 26.01.  PROMISE OR AGREEMENT MUST BE IN WRITING. (a) A promise or agreement described in Subsection (b) of this section is not enforceable unless the promise or agreement, or a memorandum of it, is

(1)  in writing; and

(2)  signed by the person to be charged with the promise or agreement or by someone lawfully authorized to sign for him.

(b)  Subsection (a) of this section applies to:

(1)  a promise by an executor or administrator to answer out of his own estate for any debt or damage due from his testator or intestate;

(2)  a promise by one person to answer for the debt, default, or miscarriage of another person;

(3)  an agreement made on consideration of marriage or on consideration of nonmarital conjugal cohabitation;

(4)  a contract for the sale of real estate;

(5)  a lease of real estate for a term longer than one year;

(6)  an agreement which is not to be performed within one year from the date of making the agreement;

(7)  a promise or agreement to pay a commission for the sale or purchase of:

(A)  an oil or gas mining lease;

(B)  an oil or gas royalty;

(C)  minerals;  or

(D)  a mineral interest;  and

(8)  an agreement, promise, contract, or warranty of cure relating to medical care or results thereof made by a physician or health care provider as defined in Section 74.001, Civil Practice and Remedies Code.  This section shall not apply to pharmacists.

The Texas Enacted Uniform Electronic Transactions Act provides:

322.002-
(8)  “Electronic signature” means an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.

322.005-
(b)  This chapter applies only to transactions between parties each of which has agreed to conduct transactions by electronic means.  Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties’ conduct.

 

The lecture notes are here.

The Separation of Powers

• Separation of Powers (173-175).
• Youngstown Sheet & Tube (175-190).
• The Powers of Congress – Article I (190-192).
• Enumerated Powers (192-193).
• M’Culloch v. Maryland (193-209)

This is a postcard of the Youngstown Sheet and Tube Mill.

Here are photographs of the actual steel mill at issue in Youngstown, Ohio.

This is Secretary of Commerce Charles Sawyer, whom Truman ordered to seize the steel mill.

 The lead opinion in Youngstown was authored by Justice Hugo Black.

There were also concurring opinions written by five Justices. This is Justice Felix Frankfurter.

This is Justice William O. Douglas.

This is Justice Robert H. Jackson. Justice Jackson, who would serve as the lead prosecutor at Nuremberg, authored what has been seen as the definitive opinion in Youngstown.

This is Justice Tom C. Clark (a graduate of University of Texas at Austin).

Chief Justice Vinson dissented, joined by Justices Reed and Minton.

You can read Executive Order 10340, Executive Order 10340 – Directing the Secretary of Commerce to Take Possession of and Operate the Plants and Facilities of Certain Steel Companiesm, here:

NOW, THEREFORE, by virtue of the authority vested in me by the Constitution and laws of the United States, and as President of the United States and Commander in Chief of the armed forces of the United States, it is hereby ordered as follows:

1. The Secretary of Commerce is hereby authorized and directed to take possession of all or such of the plants, facilities, and other property of the companies named in the list attached hereto, or any part thereof, as he may deem necessary in the interests of national defense; and to operate or to arrange for the operation thereof and to do all things necessary for, or incidental to, such operation.

2. In carrying out this order the Secretary of Commerce may act through or with the aid of such public or private instrumentalities or persons as he may designate; and all Federal agencies shall cooperate with the Secretary of Commerce to the fullest extent possible in carrying out the purposes of this order.

3. The Secretary of Commerce shall determine and prescribe terms and conditions of employment under which the plants, facilities, and other properties possession of which is taken pursuant to this order shall be operated. The Secretary of Commerce shall recognize the rights of workers to bargain collectively through representatives of their own choosing and to engage in concerted activities for the purpose of collective bargaining, adjustment of grievances, or other mutual aid or protection, provided that such activities do not interfere with the operation of such plants, facilities, and other properties.

4. Except so far as the Secretary of Commerce shall otherwise provide from time to time, the managements of the plants, facilities, and other properties possession of which is taken pursuant to this order shall continue their functions, including the collection and disbursement of funds in the usual and ordinary course of business in the names of their respective companies and by means of any instrumentalities used by such companies.

5. Except so far as the Secretary of Commerce may otherwise direct, existing rights and obligations of such companies shall remain in full force and effect, and there may be made, in due course, payments of dividends on stock, and of principal, interest, sinking funds, and all other distributions upon bonds, debentures, and other obligations, and expenditures may be made for other ordinary corporate or business purposes.

6. Whenever in the judgment of the Secretary of Commerce further possession and operation by him of any plant, facility, or other property is no longer necessary or expedient in the interest of national defense, and the Secretary has reason to believe that effective future operation is assured, he shall return the possession and operation of such plant, facility or other property to the company in possession and control thereof at the time possession was taken under this order.

7. The Secretary of Commerce is authorized to prescribe and issue such regulations and orders not inconsistent herewith as he may deem necessary or desirable for carrying out the purposes of this order; and he may delegate and authorize subdelegation of such of his functions under this order as he may deem desirable.

This was Marshall’s original draft opinion in M’Cullough v. Maryland.

This excellent video from the HBO John Adams Miniseries about the central banks is very well done.

In The Atlantic, Garrett Epps writes a strong piece explaining that Congress has fallen on its duty for refusing to vote on the President’s use of military action against ISIS. I agree wholeheartedly that to avoid the political blowback, Congress has ceded its power over the use of force. But I take one, small exception with Garrett’s article. He writes:

There is a way that the government could explain itself; indeed, the government is required to do that by Article I of the Constitution, which assigns to Congress the power to “declare war.”

Garrett emphasized “required” in the original. That is not correct. Congress isn’t required to do (nearly) anything.

Article I, Section 8 provides that “The Congress shall have power . . . to declare war.” Congress has the power, but they need not use it. It is discretionary. If Congress doesn’t declare war, that means the President must stop engaging in war. (We can discuss elsewhere whether POTUS already has the authority under the 2001 or 2002 AUMFs).

I discuss the fact that Congress really doesn’t have any affirmative obligations in this article:

Our Constitution strikes a stark asymmetry with respect to the duties and obligations of Congress and the President. In Article I, Congress bears no affirmative duties.21 “Congress shall have Power” to make a number of laws,22 but need not do so. The only duties Congress owes to the other branches concern compensation for the President and federal judges—these commands appear in Article II23 and Article III,24 not in Article I.25 This structure reflects the framers’ design that the Congress need not, and indeed cannot, act unless majorities of the House and Senate agree.

Article II operates in a diametrically opposite manner on the unitary executive. While congressional power is bound in discretion and agreement, the Executive power bears heavy responsibilities. This philosophy is embodied in the constitutional duty to “take Care that the Laws be faithfully executed.”26 Section I vests the office of the Presidency and determines how he is elected.27 Section II grants the President a number of authorities.28 Virtually all of these duties are prefaced by shall: “shall be Commander-in-Chief” and “shall have Power to grant Reprieves and Pardons.”29 Several of the key “shall” duties may only be exercised “by and with the Advice and Consent of the Senate,” such as the power to “make Treaties,” and “nominate” ambassadors, ministers, judges, and officers of the United States.30

The Constitution does not simply vest the President with powers concerning his own office, but imposes a duty on the President to execute the laws of Congress with Specifically, Article II, Section III defines the scope of the President’s affirmative obligations toward Congress. First, the President “shall from time to time give to the Congress Information of the State of the Union.”32 This is a duty the President cannot shirk; Congress must be apprised of the state of the nation to inform its governance.33 Second, the President “shall receive Ambassadors and other public Ministers.”34 He must engage with this aspect of foreign diplomacy, which limits what is sometimes viewed as an unfettered power over foreign affairs. Third, the President “shall Commission all the Officers of the United States.”35 The President has an obligation to commission officers for whatever positions Congress creates. Fourth, “on extraordinary Occasions,” the President “may”—not must—“adjourn” or “convene” Congress.36 Indeed, so as not to unduly infringe on the separation of powers, the Framers limited that responsibility to circumstances where the President “shall think [it] proper,” rather than at his whim.37